As gold prices nudge up generally, journalist Tim Mitchell talks to bullion expert Oliver Temple about whether he feels the precious metal is shining again.
Tim: Oliver, Gold Investments has been in business since 1981?
Oliver: That’s right, we’re one of the oldest bullion dealers in the UK.
Tim: We’ve had a number of downturns during that time in the country. The one in the early 1990’s I clearly remember as I was fresh out of University. There did not seem to be many jobs at the time. Then of course there was the economic ‘heart attack’ seven years ago. You’ve seen first-hand how gold has performed over those years.
Oliver: Yes, we’ve seen how gold has reacted through a number of recessions and also during better times. In 2009, at the start of the economic downturn, there was a considerable increase in people buying gold. Gold is often turned to as a safe haven in times of economic uncertainty.
Tim: George Osborne, the Chancellor, painted a pretty bleak picture for the UK’s own economy at the start of the year so presumably that’s pushing people towards the yellow metal again?
Oliver: The Chancellor’s warning was a surprise to many who thought we were out of the ‘economic woods’. Consumers are still spending and the unemployment rate has been at its lowest for many years so it seemed a shock.
We, however, took a broader view of the world economy as it does impact the UK’s own economy. We could see that there were a number of headwinds brewing.
Last year many analysts had felt that gold prices would have reacted to the Greece bailout situation, falling stocks in China and the US interest rate rise. While gold did climb in July it began to slip back towards the end of the year.
Our thoughts at the time were – and it proved right – that investors weren’t ready generally to get behind the precious metal.
Tim: But now that’s changing?
Oliver: Possibly. Certainly we are seeing more of a consistent demand for gold. It’s the longest rally in recent times.
Tim: What are the main drivers behind this now? What’s changed now?
Oliver: I think there are a number of factors. China’s rapidly slowing economy is alarming some. It is such a big force economically that inevitably that will be having a bearing on other countries. China is the second largest economy; it is the second largest economy of commercial and goods.
Tim: What about oil – is this having a bearing on gold?
Oliver: Historically, there has been a fairly tight correlation between crude prices and gold. Over production of oil could be pushing the demand we are now seeing for gold.
China’s difficulties are probably also having an effect on crude oil. In mid-June Brent crude oil started falling when Chinese stock markets began to slide.
Another US interest rate rise – there was one muted for March – could also have a bearing on gold but I am not sure this will happen now. The US growth, like the UK’s, is slowing.
Tim: Do you think this gold rally will last? Where is gold heading?
Oliver: No one can say for sure as gold prices are affected by many factors. Gold will always be significant for those who see it as part of their spiritual heritage.
Tim: Such as those celebrating Indian festivals like Diwali and the Akshaya Tritiya festivals?
Oliver: Yes, we do see demand from Asian markets particularly around key festival times. We’re trusted by these communities and have been since we started.
Gold is often used in technology which is always in demand.
Tim: So would now be a good time to invest with the world economy factors you mentioned?
Oliver: Certainly many investors are turning to gold now and taking advantage of relatively low gold prices. Last week the spot gold price surged 1.2 per cent during the overnight Asian trading session.
Gold has been setting higher peaks and shallower troughs from a near seven-year low around $1,050 back in December.
Tim: As a new investor should I put all my money into gold?
Oliver: No we would never advise that. The strength and sustainability of this gold rally is still not clear.
It’s important to stress that gold should be thought of as a medium to long-term investment; more like an insurance policy. Gold should probably be no more than 10% of an investment portfolio.
Tim: Anything else you would like to add?
You don’t have to be rich to invest in gold and that it can be used as part of Self Invested Personal Pensions (SIPPs).
We are always happy to share our experiences over a coffee with those interested in purchasing or sharing gold. I can be reached on:
020 7283 7752 or [email protected]
Oliver Temple is well respected in the bullion market field.
On LinkedIn? Why not connect to Oliver?
Tim Mitchell qualified as a journalist in 1994. He writes regularly on the metals’ markets.
Main image by Blueby and oil rig by num_skyman (http://www.freedigitalphotos.net)